sharetrader
Page 5 of 26 FirstFirst 12345678915 ... LastLast
Results 41 to 50 of 252
  1. #41
    Guru justakiwi's Avatar
    Join Date
    Aug 2016
    Location
    Canterbury
    Posts
    2,569

    Default

    So, as I said before, that’s fine. You buy into companies that don’t pay dividends and leave the others for us then. Find investments that fit your brief, and if they don’t then don’t buy. I want dividends and DRIP right now, so won’t be buying into companies that don’t provide this. You can’t expect companies to change the way they operate just to suit you.

    Quote Originally Posted by SBQ View Post
    I'm hell bent where the whole investment industry is pretty much hell bent on dividend payment programs without regard of the direction of the company (if they look for expansion or not). It bothers me that there's a bias by NZ investors to expect a dividend payment regardless of the type of company they want to invest in. It's prevalent in the brochures of NZ brokerage firms, etc. I wish there was more to choose for companies that focus more on raising book value but as i've enquired with local investment advisers, they tell me there's not such funds that operate like Berkshire Hathaway. While people like myself that question why seem to get the silly "this is not Kansas attitude" by Snow Leopard's response.

  2. #42
    Senior Member
    Join Date
    Nov 2018
    Location
    Christchurch
    Posts
    1,063

    Default

    Quote Originally Posted by justakiwi View Post
    So, as I said before, that’s fine. You buy into companies that don’t pay dividends and leave the others for us then. Find investments that fit your brief, and if they don’t then don’t buy. I want dividends and DRIP right now, so won’t be buying into companies that don’t provide this. You can’t expect companies to change the way they operate just to suit you.
    So as I said before, I can't buy listed NZ companies with the emphasis of capital gain and instead, find only those with a bias towards paying dividends. If there are any, they're not very good and too risky. From a tax advantage point of view, that makes investing in NZ real estate to be the winner.

  3. #43
    Guru justakiwi's Avatar
    Join Date
    Aug 2016
    Location
    Canterbury
    Posts
    2,569

    Default

    OK, so why not accept the dividends and make them work for you with DRIP as SNOOPY suggested? Surely you can’t object to obtaining extra shares this way. I know I’m a beginner who knows next to nothing, but I honestly don’t understand why this is such a huge problem for you.

    Quote Originally Posted by SBQ View Post
    So as I said before, I can't buy listed NZ companies with the emphasis of capital gain and instead, find only those with a bias towards paying dividends. If there are any, they're not very good and too risky. From a tax advantage point of view, that makes investing in NZ real estate to be the winner.

  4. #44
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,221

    Default

    Quote Originally Posted by SBQ View Post
    As what Snoopy has been replying, he hasn't given up and people would be a fool to believe everything is that concrete. Such as the ICA credit is not always a fully imputed 1 for 1 to the shareholders. IRD's guidebook below is very complex and like not every year will have the same 1 for 1 ratio and factors like years where the company has a loss affects the credit.

    https://www.ird.govt.nz/topics/incom...ation-grouping

    Don't forget, any company that doesn't get the ICA, the default will be RWT on the dividends they receive. NOT every NZX company is free of RWT on the dividends by having ICA nor being fully imputed.
    SBQ, you make a good point here on RWT. The NZ tax system is set up so that we only pay tax on profits once. But if the company has not paid tax on the profits that underlie the dividends they pay shareholders? Then shareholders will be hit with resident withholding tax on that dividend. This compares unfavourably with the alternative scenario of the company withholding their dividend: That would result in shareholders retaining their 'pre tax dividend value' within the company. There are ways around this though:

    1/ If in previous years, a company has not paid out all of their earnings as dividends, then they can have a 'positive imputation credit balance' on the books. This means they can still pay a fully imputed dividend on this years profits that have not been taxed, by utilising imputation credits accumulated in previous years.

    2/ A company can pay tax in advance of it being due, in order to build up the imputation credit account. Effectively that means a company is using profits from future years to pay this years dividend fully imputed. This is a more risky strategy that 1/, because future profits are not guaranteed.

    There is an additional tax effect 'at the margin' when the company tax rate, at 28%, is lower than your own marginal tax rate. If your own marginal tax rate is 30%, then you might argue that any dividend in shareholders hands will incur an extra tax bill of the difference (30%-28% = 2%). And that 2% difference becomes RWT on top of the imputation tax credit you can claim. That 2% is extra tax you would not have paid if the company had simply kept their earnings and not paid it out as a dividend to you. This is just one alternative way of looking at your tax bill though.

    Well above average income earners, those on $150,000+ for instance, still pay much lower rates of tax on the initial tranches of their income. IIRC all taxpayers pay only 15% tax on their first $15,000 worth of income. The rate of tax then gets progressively higher and the highest rate of tax only kicks in once you reach the $70k (? from memory) mark. So even those on $150k have an actual tax bill rate rather lower than their marginal tax rate. This means you can offset that incremental 2% increase on RWT from NZ dividends against tax due on other income that is not taxed at source.

    Another way to get around this 'extra RWT' is to put all your investments in PIE funds. These are taxed at 28% even for the highest earners. However, all PIE entities that I know of have management fees that will wipe out most if not all of your 'tax savings'.

    In summary, resident withholding tax (RWT) is an issue. But it is an issue at the margin for shareholders in companies that generate taxable profits. It doesn't undermine the general principle of imputation credits making the investment treatment of dividends tax neutral.

    SNOOPY
    Last edited by Snoopy; 26-05-2019 at 09:25 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  5. #45
    Senior Member
    Join Date
    Nov 2018
    Location
    Christchurch
    Posts
    1,063

    Default

    Quote Originally Posted by justakiwi View Post
    OK, so why not accept the dividends and make them work for you with DRIP as SNOOPY suggested? Surely you can’t object to obtaining extra shares this way. I know I’m a beginner who knows next to nothing, but I honestly don’t understand why this is such a huge problem for you.
    You've missed my point, but that's ok (beginners aren't expected to know). When I look at buying shares in a company, I view it as being a partner of the business. Therefore, the partner's 1st intention should not be to extract dividends from the business, and certainly when the business seeks capital for growth, why elevate un-necessary capital costs that are detrimental to the shareholders (or as I say, to the partnership?). In another way if I was a partner in a business, I would prefer the business to keep the after tax cash and use it for growing the business. Not to expect that cash to be put in my pocket year after year. Then after many years, when the business has fully matured with no growth for expansion, THEN the dividend card be played.

  6. #46
    Guru justakiwi's Avatar
    Join Date
    Aug 2016
    Location
    Canterbury
    Posts
    2,569

    Default

    I do do understand what you are saying and for start up/emerging companies I would agree with you. But once that company is established I would personally want to get some income from it - either by way of cash dividends or by way of DRIP. The difference between your desire and mine is (and yes I’m making an assumption) is because we are poles apart in terms of our individual financial position/situation. Your investment goals are different to mine, for obvious reasons.

    Does any business/company actually ever reach the point where no more growth is possible? How do you make your call on when a company has reached that point?

    Quote Originally Posted by SBQ View Post
    You've missed my point, but that's ok (beginners aren't expected to know). When I look at buying shares in a company, I view it as being a partner of the business. Therefore, the partner's 1st intention should not be to extract dividends from the business, and certainly when the business seeks capital for growth, why elevate un-necessary capital costs that are detrimental to the shareholders (or as I say, to the partnership?). In another way if I was a partner in a business, I would prefer the business to keep the after tax cash and use it for growing the business. Not to expect that cash to be put in my pocket year after year. Then after many years, when the business has fully matured with no growth for expansion, THEN the dividend card be played.

  7. #47
    Guru
    Join Date
    Feb 2005
    Location
    Auckland, , New Zealand.
    Posts
    3,227

    Default

    If a company is paying a dividend then it must be making a profit. Not all profit is distributed thus leaving a varying % for further expansion.

  8. #48
    Guru justakiwi's Avatar
    Join Date
    Aug 2016
    Location
    Canterbury
    Posts
    2,569

    Default

    Yes, but you said above, companies should not pay dividends until they are fully matured with no further room for expansion. My question is (as a beginner who is learning) do companies ever truly get to the point where no further expansion/growth is possible?

    Quote Originally Posted by 777 View Post
    If a company is paying a dividend then it must be making a profit. Not all profit is distributed thus leaving a varying % for further expansion.

  9. #49
    Guru
    Join Date
    Feb 2005
    Location
    Auckland, , New Zealand.
    Posts
    3,227

    Default

    Quote Originally Posted by justakiwi View Post
    Yes, but you said above, companies should not pay dividends until they are fully matured with no further room for expansion. My question is (as a beginner who is learning) do companies ever truly get to the point where no further expansion/growth is possible?
    Not my statement justakiwi. That was SBQ and I don't agree with him.
    Last edited by 777; 29-05-2019 at 05:43 PM.

  10. #50
    Guru justakiwi's Avatar
    Join Date
    Aug 2016
    Location
    Canterbury
    Posts
    2,569

    Default

    Oops! Sorry

    Quote Originally Posted by 777 View Post
    Not my statement justakiwi.
    Last edited by justakiwi; 29-05-2019 at 05:44 PM.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •